Fraud & Corporate Crime

House of Lords Select Committee determines Bribery Act 2010 is an "exemplary piece of legislation" and encourages the Government to consider extending the "failure to prevent" offence to other economic crimes

Today, Thursday 14 March 2019, the House of Lords Select Committee ("HLSC") published its post-legislative scrutiny report on the Bribery Act 2010 (the "Act") having held 23 oral evidence sessions and reviewed 61 written submissions (including from Fieldfisher – see https://fraudandcorporatecrime.fieldfisher.com/2018/how-effective-is-the-bribery-act-fieldfishers-submission-to-the-house-of-lords-select-committee-is-published). The Act brought in, along with offences of offering or giving and requesting or receiving bribes and the offence of bribing foreign public officials, a strict liability corporate offence of failing to prevent bribery by a company's "associated persons". The only defence available for the failure to prevent offence is to have in place "adequate procedures" designed to prevent associated persons paying bribes on the corporate's behalf.

The HLSC report praised the Act as a "model piece of legislation" and did not propose any changes to it. However, the HLSC took on board concerns raised by the business community, and this firm, that the Guidance on the Act is not as clear as it could be. The HLSC made recommendations for amending the Guidance including by:

providing more examples and suggesting procedures which, if adopted, are likely to provide a good defence to the corporate section 7 failure to prevent bribery offence; and

making it clear that “adequate” (in the context of having adequate procedures in place to prevent bribery) does not mean, and is not intended to mean, anything more stringent than “reasonable in all the circumstances”.

These recommendations are welcome given the lack of clarity and understanding around some areas of the Act. However, the recommendations do not deal with all the areas which have caused uncertainty such as the extent of connectivity to the UK required for a business to be considered as "conducting business" in the UK, who falls within the definition of "associated person", or the level of control that would be required to bring an associated person within the net of a business’ policies and procedures. We consider this to be a missed opportunity to recommend further guidance is provided on these issues and business will continue to incur time and expense in getting to grips with these concepts and what they mean for them.

The HLSC also recommended that the Government "delay no more in…..reaching a conclusion on whether to extend the “failure to prevent” offence to other economic crimes." As it stands, the only other corporate failure to prevent offence is that under the Criminal Finances Act 2017 in relation to the criminal facilitation of tax evasion. A corporate can only be prosecuted for other economic crimes, such as fraud, if it can be shown the offender was the directing mind and will of the business. That is a difficult test to meet and can be avoided if businesses ensure their executive management do not engaged in its day to day business dealings. The recommendation by the HLSC ties in with the Treasury Committee report Economic Crime – Anti-money laundering supervision and sanctions implementation published on 8 March 2019. That report concluded that the Government's proposals on reforming the law on corporate liability for economic crime had "stalled" and without reform "multi-national firms appear beyond the scope of legislation designed to counter economic crime". The combination of these two reports may exert pressure on the Government to progress the consultation on such reforms which have been on the backburner following a call for evidence in 2017. We will have to wait and see where the failure to prevent offence goes next.